European Gold ETFs See Strong Growth Amid Global Trends

October Overview

In October, global physically-backed gold ETFs experienced an inflow of $2.7 billion, marking their fourth consecutive month of growth. European funds were at the forefront, attracting substantial investments while Asian markets remained net buyers. In contrast, North America experienced slight outflows as overall holdings of gold ETFs rose to a new record of 4,275 tons.

Despite increasing inflows, total assets under management (AUM) fell by 6% to $542 billion, primarily due to declining gold prices that overshadowed new investments.

Regional Insights

While the U.S. technology sector faced pressure due to concerns over AI-related spending, there was a noticeable impact on gold ETFs in the region. Some investors opted to liquidate their gold holdings for immediate cash needs amid market stress, highlighting gold's liquidity advantage in turbulent times.

Interestingly, U.S. gold ETFs did experience minor inflows during the last week of October as the stock market took another hit. This indicates a strategic shift where investors were looking to diversify under political and economic uncertainties, especially with midterm elections approaching.

For 18 consecutive weeks, U.S. gold ETFs have seen net inflows, maintaining this trend despite fluctuations in gold prices, surging regional yields, and shifting expectations regarding the actions of local central banks.

Asian Market Activity

Asian investors contributed $1.3 billion to gold ETFs in October, sustaining a streak of four months of positive inflows. China continued to lead in this new buying trend, with local investors increasingly turning to gold as a strategy amidst a declining equity market and lower government bond yields. These changing dynamics reduced the opportunity cost associated with holding gold, despite its price volatility.

Japanese gold ETFs also saw similar patterns, receiving a boost from safe-haven flows as the Nikkei index dipped and government bond yields dropped, influenced by the Bank of Japan’s cautious stance on interest rates. Additionally, India maintained its gold ETF buying momentum even amidst a temporary hold on new subscriptions from local mutual funds.

Trading Volumes and Market Activity

On the trading front, total net long positions on COMEX fell by 94 tons in October, reaching their lowest level since July. Managed money significantly reduced their futures positions by 53 tons during the month. Conversely, other reportables saw decreases of 54 tons, while spreads contracted by 13 tons.

Despite these reductions, interestingly, the net open interest in gold options on COMEX increased by 6% in October, indicating possible market maneuvering during the final days of the month. Traders appeared to engage in rollover strategies amid contract expirations alongside potential dip-buying activities.